How the left went wrong

In early 2003, the largest co-ordinated protests in history took place against the Iraq war. This, a

No one who looked at the liberal left from the outside could pretend that it provided anything other than token opposition to the "insurgents" from the Ba'ath Party and al-Qaeda. The British Liberal Democrats, the Continental social-democratic parties, the African National Congress and virtually every leftish newspaper and journal on the planet were unable to accept that the struggles of Arabs and Kurds had anything to do with them. Mainstream Muslim organisations were as indifferent to the murder of Muslims by Muslims in Iraq as they were to those in Darfur. For most world opinion, Tony Blair's hopes of "giving people oppressed, almost enslaved, the prospect of democracy and liberty" counted for nothing. The worst of the lot were the organisers of the UK anti-war demonstrations who turned out to be not so much against war, but on the wrong side.

Their leader, George Galloway, was a bombastic Scottish Labour MP who combined blood-curdling rhetoric with a whining sentimentality, like many a thug before him. In the Nineties, his political career appeared to be dead. Contrary to popular prejudice, successful politicians don't always love the sound of their own voice. The ones who get on learn to hold their tongue and speak for a purpose. Galloway was too fond of grandstanding to make it in the best of times for the left. When new Labour took charge, many Scottish bruisers from the old left found preferment under Blair, who, like all prime ministers, needed his enforcers. But Galloway missed the boat, and perhaps never wanted to board it. He seemed an irrelevant backbencher who could hope only for the occasional appearance on talk radio, but he proved that a minor politician from democratic Britain could build an alternative career in Arab dictatorships. Their state-controlled media quoted approved foreigners at length, giving Galloway the attention he could not get at home. The unending tyranny of totalitarian Iraq and the ephemeral glitz of Celebrity Big Brother seem as far apart as it is possible to be. But the anti-war movement should not have been surprised that Galloway ended up as an exhibit on a TV freak show. The celebrity and the totalitarian share a desire to have their face in every news paper and on every television screen. Both are what the playwright Heathcote Williams called "psychic imperialists", who want to col onise the minds of millions.

In 1994, long before he crawled around the Big Brother house, Galloway made his first steps towards stardom when Iraqi TV showed him bending the knee before Saddam Hussein. He gave the most emphatic demonstration of the switch on the left when he flew to Baghdad in the aftermath of the first war against Saddam and declared: "I thought the president would appreciate to know that even today, three years after the war, I still meet families who are calling their newborn sons Saddam . . . Sir, I salute your courage, your strength, your indefatigability. And I want you to know that we are with you until victory, until victory, until Jerusalem." If you listened to what Galloway said, you noticed a difference from what had gone before. With the brief exception of the two years of the Hitler-Stalin pact, 20th-century fellow-travellers had to choose between communism and fascism, but in the 21st century you could refuse to be "judgemental" about any system as long as it was anti-democratic.

Galloway saluted the fascistic perpetrator of racial extermination campaigns, but he was just as keen on communism. He lamented "the disappearance of the Soviet Union", and said it was "the biggest catastrophe of my life". When asked about his admiration for Fidel Castro, the dictator of Cuba, he said, "I don't believe that Fidel Castro is a dictator." When Saddam was gone, Galloway went to Ba'athist Syria, even though it was the sworn enemy of Ba'athist Iraq, and applauded it as "the last castle of the Arab dignity and the Arab rights". Saddam had launched an unprovoked war against Iran, but when Hezbollah, Iran's terrorist proxy in Lebanon, began a war with Israel, a finger-jabbing Galloway bellowed to a rally in London, "Hezbollah has never been a terrorist organisation. I am here to glorify the Lebanese resistance." Stalinism, Castroism, Islamism, Ba'athism, the old distinctions no longer held. Any ism would do as an alternative to democracy.

Such was the leader of the Stop the War Coalition, a man offered columns by the Guardian, the parish magazine of the "liberal" English middle class, and buttered up with oily profiles in the New York Times, the parish magazine of the "liberal" American middle class. A respectable movement of the right or the left would have refused to have anything to do with him, but the fever George W Bush provoked and the waning power of liberal principles meant that not one heckler raised a voice in protest when he addressed the London marchers who were so eager to chant "Not in my name".

A theme of this book is that ideas on the fringe are worth examining. Not only do the thoughts of apparently inconsequential figures - Michel Aflaq, Karl Marx, Friedrich Hayek, Sayyid Qutb - take off, but the extreme parties magnify trends in wider society. The Socialist Workers Party, Galloway's backer and the real force behind the Stop the War Coalition, distinguished itself by taking the opportunism and control-freakery of conventional politics and pushing them further than any democratic party would dare, when it ordered its pliant members into an alliance with the Islamic right in which not one of the old taboos held.

Take fascist conspiracy theory. Globalise Resistance, an anti-capitalist group dominated by the SWP, first proposed a global day of protest against the war at the "Cairo Conference" of anti-war activists. The delegates sounded as if tsarist Russia and Nazi Germany had inspired them when they declared that the 2003 war against Iraq was the result of a "Zionist plan, which targets the establishment of the greater State of Israel from the Nile to the Euphrates".

Rich script

Making friends with your enemy's enemy is a familiar tactic, but it is not as uncomplicated as it seems. More often than not, you have to betray your old friends when you conclude your pact. The organisers of the anti-war demonstrations and their friends treated Iraqi left-wingers like criminals because they refused to take up arms against the Americans as the script of the rich world's left said they must.

Instead of supporting the far right, the uppity natives said they wanted to escape from al-Qaeda and the Ba'ath and to participate in free elections. Iraqi trade unionists in particular were met with the most implacable hatred. At the 2004 European Social Forum speaker after speaker supported the "resistance". No one booed when one said that those who questioned the motives of the suicide bombers who were murdering daily (mainly Muslim) civilians were guilty of "anti-Islamic racism". They dismissed the leaders of the Iraqi left as "quislings", even when they were men such as Hadi Saleh. The left would once have hailed him a hero for risking his life for the welfare of humanity. Saleh was a printer and trade union organiser whom the Ba'athists arrested as soon as they came to power in 1968. He sat on death row for five years. They let him go, and he fled to Sweden with his wife. Like many in the Iraqi Communist Party, he lost his faith in Moscow after it cut deals with Saddam and started a long journey towards constitutional politics. He had to live with a constant fear of assassination. Saleh opposed the war of 2003, but returned home after it was over. From next to nothing he and his comrades built a mass movement in the face of the indifference or hostility of the Americans, who were so lost in conservative dogma they didn't grasp that free societies and free trade unions go together. They came for him, of course. The professional nature of the torture wounds on his body suggested that "they" were Ba'athist secret policemen rather than Bin Ladenists. When he was dead, they took his union records to give them the names of more people to kill.

I've never felt as ashamed of my trade of liberal journalism as I did at the time of his murder. The BBC boasts that it questions without fear or favour. But when you hire upper-middle-class arts graduates, pay them well and allow them to work, eat and sleep together in west London, there's bound to be a "Collective Group Think". In Iraq's case, it did not come out in the hard questions they asked the other side, but in the soft questions they asked their own side. For years, the BBC's attack-dog presenters couldn't manage to give one opponent of the war a tough interview. Not even Galloway. My colleagues were rich men and women by British standards, let alone world standards. They kept silent so they could maintain the illusion that the family of the "left" was flawless. No one would have tortured them if they had spoken out. No one would have beaten their genitals, broken their bones, strangled them with an electric flex and then stolen their address book so that they could do the same to their friends. The worst they would have got were contemptuous looks at dinner parties, badges of honour at the time.

When I asked my colleagues why the fact that an anti-war movement being led by apologists for Saddam was not a story, when a Countryside Alliance led by neo-Nazis would have been, they said, "Well, the people who went on their demonstrations didn't agree with Galloway and the SWP. They followed Robin Cook, Jacques Chirac, Gerhard Schröder and the Liberal Democrats." This was true up to a point. "And anyway," they continued, "it didn't matter" - an answer which showed how little they understood the world around them.

The convergence of far-left and far-right ideas is not the only reason for taking a good look at the organisers of the anti-war marches. Because they said they were on the left, they had to face an argument that was to confront men and women with status, in the BBC, liberal media, NGOs, Liberal Democrats and the centre-left governments of Europe, South America and South Africa. All right, it ran, you say the war against Iraq was illegal, and you wish it had never happened; you're appalled by the casualties and sickened by Bush. That's fine, and you have a point, but now that far-right psychopaths are ravaging the country, are you going to stand up for your social-democratic principles and support the victims or does anything go for you, too?

"What's Left? How liberals lost their way" is published by Fourth Estate (£12.99). Next week, John Kampfner reviews Nick Cohen's book

Nick Cohen is an author, columnist and signatory of the Euston Manifesto. As well as writing for the New Statesman he contributes to the Observer and other publications including the New Humanist. His books include Pretty Straight Guys – a history of Britain under Tony Blair.

MILES COLE
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The new Brexit economics

George Osborne’s austerity plan – now abandoned by the Tories – was the most costly macroeconomic policy mistake since the 1930s.

George Osborne is no longer chancellor, sacked by the post-Brexit Prime Minister, Theresa May. Philip Hammond, the new Chancellor, has yet to announce detailed plans but he has indicated that the real economy rather than the deficit is his priority. The senior Conservatives Sajid Javid and Stephen Crabb have advocated substantial increases in public-sector infrastructure investment, noting how cheap it is for the government to borrow. The argument that Osborne and the Conservatives had been making since 2010 – that the priority for macroeconomic policy had to be to reduce the government’s budget deficit – seems to have been brushed aside.

Is there a good economic reason why Brexit in particular should require abandoning austerity economics? I would argue that the Tory obsession with the budget deficit has had very little to do with economics for the past four or five years. Instead, it has been a political ruse with two intentions: to help win elections and to reduce the size of the state. That Britain’s macroeconomic policy was dictated by politics rather than economics was a precursor for the Brexit vote. However, austerity had already begun to reach its political sell-by date, and Brexit marks its end.

To understand why austerity today is opposed by nearly all economists, and to grasp the partial nature of any Conservative rethink, it is important to know why it began and how it evolved. By 2010 the biggest recession since the Second World War had led to rapid increases in government budget deficits around the world. It is inevitable that deficits (the difference between government spending and tax receipts) increase in a recession, because taxes fall as incomes fall, but government spending rises further because benefit payments increase with rising unemployment. We experienced record deficits in 2010 simply because the recession was unusually severe.

In 2009 governments had raised spending and cut taxes in an effort to moderate the recession. This was done because the macroeconomic stabilisation tool of choice, nominal short-term interest rates, had become impotent once these rates hit their lower bound near zero. Keynes described the same situation in the 1930s as a liquidity trap, but most economists today use a more straightforward description: the problem of the zero lower bound (ZLB). Cutting rates below this lower bound might not stimulate demand because people could avoid them by holding cash. The textbook response to the problem is to use fiscal policy to stimulate the economy, which involves raising spending and cutting taxes. Most studies suggest that the recession would have been even worse without this expansionary fiscal policy in 2009.

Fiscal stimulus changed to fiscal contraction, more popularly known as austerity, in most of the major economies in 2010, but the reasons for this change varied from country to country. George Osborne used three different arguments to justify substantial spending cuts and tax increases before and after the coalition government was formed. The first was that unconventional monetary policy (quantitative easing, or QE) could replace the role of lower interest rates in stimulating the economy. As QE was completely untested, this was wishful thinking: the Bank of England was bound to act cautiously, because it had no idea what impact QE would have. The second was that a fiscal policy contraction would in fact expand the economy because it would inspire consumer and business confidence. This idea, disputed by most economists at the time, has now lost all credibility.

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The third reason for trying to cut the deficit was that the financial markets would not buy government debt without it. At first, this rationale seemed to be confirmed by events as the eurozone crisis developed, and so it became the main justification for the policy. However, by 2012 it was becoming clear to many economists that the debt crisis in Ireland, Portugal and Spain was peculiar to the eurozone, and in particular to the failure of the European Central Bank (ECB) to act as a lender of last resort, buying government debt when the market failed to.

In September 2012 the ECB changed its policy and the eurozone crisis beyond Greece came to an end. This was the main reason why renewed problems in Greece last year did not lead to any contagion in the markets. Yet it is not something that the ECB will admit, because it places responsibility for the crisis at its door.

By 2012 two other things had also become clear to economists. First, governments outside the eurozone were having no problems selling their debt, as interest rates on this reached record lows. There was an obvious reason why this should be so: with central banks buying large quantities of government debt as a result of QE, there was absolutely no chance that governments would default. Nor have I ever seen any evidence that there was any likelihood of a UK debt funding crisis in 2010, beyond the irrelevant warnings of those “close to the markets”. Second, the austerity policy had done considerable harm. In macroeconomic terms the recovery from recession had been derailed. With the help of analysis from the Office for Budget Responsibility, I calculated that the GDP lost as a result of austerity implied an average cost for each UK household of at least £4,000.

Following these events, the number of academic economists who supported austerity became very small (they had always been a minority). How much of the UK deficit was cyclical or structural was irrelevant: at the ZLB, fiscal policy should stimulate, and the deficit should be dealt with once the recession was over.

Yet you would not know this from the public debate. Osborne continued to insist that deficit reduction be a priority, and his belief seemed to have become hard-wired into nearly all media discussion. So perverse was this for standard macroeconomics that I christened it “mediamacro”: the reduction of macroeconomics to the logic of household finance. Even parts of the Labour Party seemed to be succumbing to a mediamacro view, until the fiscal credibility rule introduced in March by the shadow chancellor, John McDonnell. (This included an explicit knockout from the deficit target if interest rates hit the ZLB, allowing fiscal policy to focus on recovering from recession.)

It is obvious why a focus on the deficit was politically attractive for Osborne. After 2010 the coalition government adopted the mantra that the deficit had been caused by the previous Labour government’s profligacy, even though it was almost entirely a consequence of the recession. The Tories were “clearing up the mess Labour left”, and so austerity could be blamed on their predecessors. Labour foolishly decided not to challenge this myth, and so it became what could be termed a “politicised truth”. It allowed the media to say that Osborne was more competent at running the economy than his predecessors. Much of the public, hearing only mediamacro, agreed.

An obsession with cutting the deficit was attractive to the Tories, as it helped them to appear competent. It also enabled them to achieve their ideological goal of shrinking the state. I have described this elsewhere as “deficit deceit”: using manufactured fear about the deficit to achieve otherwise unpopular reductions in public spending.

The UK recovery from the 2008/2009 recession was the weakest on record. Although employment showed strong growth from 2013, this may have owed much to an unprecedented decline in real wages and stagnant productivity growth. By the main metrics by which economists judge the success of an economy, the period of the coalition government looked very poor. Many economists tried to point this out during the 2015 election but they were largely ignored. When a survey of macroeconomists showed that most thought austerity had been harmful, the broadcast media found letters from business leaders supporting the Conservative position more newsworthy.

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In my view, mediamacro and its focus on the deficit played an important role in winning the Conservatives the 2015 general election. I believe Osborne thought so, too, and so he ­decided to try to repeat his success. Although the level of government debt was close to being stabilised, he decided to embark on a further period of fiscal consolidation so that he could achieve a budget surplus.

Osborne’s austerity plans after 2015 were different from what happened in 2010 for a number of reasons. First, while 2010 austerity also occurred in the US and the eurozone, 2015 austerity was largely a UK affair. Second, by 2015 the Bank of England had decided that interest rates could go lower than their current level if need be. We are therefore no longer at the ZLB and, in theory, the impact of fiscal consolidation on demand could be offset by reducing interest rates, as long as no adverse shocks hit the economy. The argument against fiscal consolidation was rather that it increased the vulnerability of the economy if a negative shock occurred. As we have seen, Brexit is just this kind of shock.

In this respect, abandoning Osborne’s surplus target makes sense. However, there were many other strong arguments against going for surplus. The strongest of these was the case for additional public-sector investment at a time when interest rates were extremely low. Osborne loved appearing in the media wearing a hard hat and talked the talk on investment, but in reality his fiscal plans involved a steadily decreasing share of public investment in GDP. Labour’s fiscal rules, like those of the coalition government, have targeted the deficit excluding public investment, precisely so that investment could increase when the circumstances were right. In 2015 the circumstances were as right as they can be. The Organisation for Economic Co-operation and Development, the International Monetary Fund and pretty well every economist agreed.

Brexit only reinforces this argument. Yet Brexit will also almost certainly worsen the deficit. This is why the recent acceptance by the Tories that public-sector investment should rise is significant. They may have ­decided that they have got all they could hope to achieve from deficit deceit, and that now is the time to focus on the real needs of the economy, given the short- and medium-term drag on growth caused by Brexit.

It is also worth noting that although the Conservatives have, in effect, disowned Osborne’s 2015 austerity, they still insist their 2010 policy was correct. This partial change of heart is little comfort to those of us who have been arguing against austerity for the past six years. In 2015 the Conservatives persuaded voters that electing Ed Miliband as prime minister and Ed Balls as chancellor was taking a big risk with the economy. What it would have meant, in fact, is that we would already be getting the public investment the Conservatives are now calling for, and we would have avoided both the uncertainty before the EU referendum and Brexit itself.

Many economists before the 2015 election said the same thing, but they made no impact on mediamacro. The number of economists who supported Osborne’s new fiscal charter was vanishingly small but it seemed to matter not one bit. This suggests that if a leading political party wants to ignore mainstream economics and academic economists in favour of simplistic ideas, it can get away with doing so.

As I wrote in March, the failure of debate made me very concerned about the outcome of the EU referendum. Economists were as united as they ever are that Brexit would involve significant economic costs, and the scale of these costs is probably greater than the average loss due to austerity, simply because they are repeated year after year. Yet our warnings were easily deflected with the slogan “Project Fear”, borrowed from the SNP’s nickname for the No campaign in the 2014 Scottish referendum.

It remains unclear whether economists’ warnings were ignored because they were never heard fully or because they were not trusted, but in either case economics as a profession needs to think seriously about what it can do to make itself more relevant. We do not want economics in the UK to change from being called the dismal science to becoming the “I told you so” science.

Some things will not change following the Brexit vote. Mediamacro will go on obsessing about the deficit, and the Conservatives will go on wanting to cut many parts of government expenditure so that they can cut taxes. But the signs are that deficit deceit, creating an imperative that budget deficits must be cut as a pretext for reducing the size of the state, has come to an end in the UK. It will go down in history as probably the most costly macroeconomic policy mistake since the 1930s, causing a great deal of misery to many people’s lives.

Simon Wren-Lewis is a professor of economic policy at the Blavatnik School of Government, University of Oxford. He blogs at: mainlymacro.blogspot.com

 Simon Wren-Lewis is is Professor of Economic Policy in the Blavatnik School of Government at Oxford University, and a fellow of Merton College. He blogs at mainlymacro.

This article first appeared in the 21 July 2016 issue of the New Statesman, The English Revolt